Nogger's Blog

31/01/11 -- The market seems to be struggling to weigh up the impact to mounting civil unrest in Egypt. The most populous Arab nation on the planet is not only the world's largest wheat buyer, but the also hold the keys to the Suez Canal.

Brent crude came within a whisker of breaking through USD100/barrel for the first time in more than two years on Friday, peaking at USD99.97/barrel, on worries that a further escalation of the violent anti-government protests there could disrupt traffic passing through the Suez Canal.

That may affect the supply of oil from the Persian Gulf into Europe, hence the hefty USD10/barrel premium for Brent over NYMEX crude at the moment.

Egypt said over the weekend that it won't step-up on it's regular wheat purchases, but that it will continue to buy "the usual quantities". The market seems to have been expecting them to follow Algeria & Tunisia and increase their buying, but so far no tenders have been forthcoming.

There are question marks too over whether the continued unrest might disrupt import operations at major Egyptian ports. The North African country has reputedly bought over 2.75 MMT of US wheat so far this marketing year, and over 670 TMT of that is apparently still to be shipped.

There's an interesting situation developing here that's throwing up more questions than answers. Certainly I'd have thought that the government wouldn't want to cause further problems by disrupting the supply of state-subsidised bread to the masses.

It may however make exporters think twice about participating in future Egyptian tenders. Who's going to be in power next week and have they got the chequebook? How easy/expensive is going to be to charter a boat to go there? And what if the Suez Canal is closed when you've already sailed from say Australia?

Hmmm, here's another one: "I wonder if we can claim force majuere on this cheap stuff we've got sold to them and sell it elsewhere at today's prices instead?"